SWF to prevent “oil curse”− Canadian High Commissioner

With US oil giant ExxonMobil recording more successes at oil exploration in Guyana’s waters, chances are there will be an increase in monies being pumped into Guyana’s already fragile economy.

And with the establishment of a Sovereign Wealth Fund (SWF) already in the pipeline, Canadian High Commissioner to Guyana Pierre Giroux said his Government has already committed to assist Guyana in this process. “When a country is planning to increase its petroleum sector, there is a big effect. The country will be totally transformed. In the case of Guyana, if production goes to 100 barrels a day, and continues to increase, the country will move from an aid recipient country, to actually a country with no need, it will have its own funding. But how to manage that funding is the question”, the High Commissioner told Guyana Times in an exclusive interview on Tuesday.
He said many countries with such resources try to prevent the “oil curse”, which means that when oil revenue increases rapidly people begin increasing their expenses. If oil price suddenly falls, then there is also a crisis, as is currently happening in some neighbouring countries, including Trinidad and Tobago and to a greater extent Venezuela. He said the Sovereign Wealth Fund will be used to try to control the use of the future revenue in a way that is usable in a rational way over a long period of time.
“So the concept is quite rational, let’s put some of the money aside, so when there is variation in prices, we can use it. The Wealth Fund is also a way in which you can allocate funds, to tell the public that the funds that are being received, is not to buy Mercedes, but to invest in the future”. He said Calgary, located in Alberta, the largest oil producing province of Canada, is currently in discussion with the Government of Guyana on the issue. Canada, he said, produces about four million barrels of oil annually and has widespread knowledge in SWF.  “So what we would like to do is simply share our knowledge, so that the Government of Guyana can choose what sort of model of the Wealth Fund they would like to put in place… a decision of the Guyanese people of course, but we are collaborating, we’re offering our experience”. President David Granger, upon assuming office in May last year – the very month ExxonMobil announced the discovery of oil in the Stabroek Block – told  Guyana Times that his Government would be using the revenues garnered from the oil and gas sector, and other natural resources sector, to be placed in a SWF.
A sovereign wealth fund consists of pools of money derived from a country’s reserves, set aside for investment purposes to benefit the country’s economy and citizens. The funding for a sovereign wealth fund comes from central bank reserves that accumulate as a result of budget and trade surpluses, and from revenue generated from the exports of natural resources.